An Open Source DAO (Decentralized Autonomous Organization) Structure

Decentralized autonomous organizations (DAOs) are entities that resemble collectives or cooperatives in some ways but don’t have any central points of control. Instead, they rely on various incentive schemes to create cooperation among members of the organization and allow them to work together. We’re not controlled by any one person or entity but rather governed by everyone in our community through consensus.

This means we don’t have to rely on third parties like banks and lawyers to process transactions, which saves us money and time. Our members can also vote directly on proposals that impact their lives instead of relying on middlemen who may be out of touch with their needs.

Our Framework

People can establish Decentralized Autonomous Organizations governed by their choice of code, but the core functionality and infrastructure of the DAO itself will need to be built on a framework that can direct collaboration at the human level. This is where the McDAOnolds Standard DAO Framework comes in.

We’re releasing the Standard DAO Framework we wrote as open-source so that anybody wanting to construct a transparent organization with governance and decision-making systems crafted to encompass a broad set of human values and ideals can do so easily. You can use this as a foundational starting point, copy it and evolve it as the beginning of your own DAO.

It’s a fully decentralized, leaderless framework for building DAO(S) with the following features:

- Multi-tiered voting structure where anyone from member to the administrator to maintainer can propose or retract votes as well as nominate or eject administrators and/or maintainers

- Tamperproof, reputation/trust system to make it costly for malicious actors to try subverting the community’s interests

- Default voting structure that implements liquid democracy with representative democracy as a fallback if necessary

- An approach for a configurable token system with quick and efficient distribution based on the contribution of value/labor

DAO Vision

We envision a world where DAOs become more prevalent than existing legal frameworks. We want to enable people to truly own themselves and share their skills, ideas, values, creations, and labor freely with the rest of humanity without asking permission from anyone else.

A few examples of how this might play out in our daily lives are:

- Holders of house deeds can create a DAO that allows them to collaboratively manage and maintain their homes instead of hiring a single contractor or management company

- A group of musicians distributed across the globe could create a DAO where they vote on which songs to record, share revenue from those recordings equitably, and compensate all band members according to their contributions

- A decentralized, federated social media platform can engage directly with its users and automatically reward those who create value for the network without exploiting their privacy or attention

We won’t be releasing a specific implementation of this framework, as we believe it should be configurable to suit the needs and values of the crypto community.

DAO Administration

In a DAO, anyone is free to put themselves up for consideration as a leader or administrator by initiating a proposal that will go into effect via majority vote if it garners enough support from other members. Any member of a DAO can put themselves up for consideration as an administrator by initiating a proposal that will go into effect via majority vote if it garners enough support from other members.

DAO leaders will be required to rotate on a monthly basis, to ensure that all members get a chance to lead and that no individual or small group of leaders build up too much power. Each leader should have enough time to properly execute their role without being burdened by administrative work during their term. We also recommend limiting leadership rotations to a maximum of one per year per member.

Administrators are required to have 5+ years of proven track record in their field of expertise. Administrators can be added by holding a vote for the administrator privilege, which will require approval by 75% of the community via 2/3rds majority.

DAO Governance Proposal Process

While it’s possible to make proposals concerning anything related to managing the group’s shared resources, most proposals will probably be related to the allocation of community funds, the execution of technology roadmaps, and the direction of future development of software that interfaces with the DAO or enhances its capabilities.

To initiate a proposal, the creator must send the designated amount of ether to the DAO’s contract with a data element that uniquely and verifiably identifies them and their proposal. The DAO’s contract will hold this ether in escrow until the proposal period ends, at which point it will distribute it to the appropriate address or contract as determined by the results of the vote.

In order to prevent spam proposals, the initial transaction must also pay a nonzero ether fee that will be collected into the community vault.

In addition to being able to elect administrators, maintainers, and moderators, DAO members can set up an ad hoc, temporary arbitration system if needed. Arbitration is necessary when two or more members are at odds with one another but the rest of the community has not yet settled on a solution.

The first line item on any proposal should be a brief summary of its purpose and an estimate of the time needed to fulfill it, so community members know whether or not they want to support it. There can be multiple line items for a proposal that cover different aspects of the same topic.

The creator can set a voting period length of between 1 and 4 weeks to allow sufficient time for members to evaluate the proposal and vote before the end date is reached. This will enable proposals to continue evolving even if they don’t garner enough support initially, but there must be a reasonable time period allotted for new members to get up to speed on the proposal before it’s put up for another vote.

Additionally, if at least 51% of all stakeholders support a proposal within the first 30 days, then it will be eligible for an automatic development mechanism that allows proposals to create working groups to further their purposes and continue their work while the proposal is in progress. This non-contentious mechanism is in place to avoid creating a bureaucratic proposal process that would be too slow or complicated to operate.

All proposals are open for discussion on the forums until voting opens, at which point they can either become active or fail by default if there aren’t enough votes.

All users who send a valid transaction to the DAO’s contract during any given time frame are allowed one vote per DAO token they hold at this start time for each of the proposals.

The creator of a proposal is not entitled to a vote.

DAO Voting

The multi-tiered voting structure provides a way for everyone from house members to content creators and consumers to self-organize around a shared set of values without subjecting themselves to the hierarchical control inherent in today’s corporations, nonprofits, and other institutions.

The DAO has created a different type of voting system that is unique in the cryptocurrency space. Under this model, each Ethereum account gets one vote per the proposal, where its weight is proportional to the number of ETH it contains at the time of the vote. Voting power is locked for three weeks following an unsuccessful proposal.

It’s required that a minimum number of members (or weighted voting power) be reached for the proposal to pass.

The first tier is the time slot during which all non-divisible votes cast by token holders are counted equally. Any member who doesn’t vote has the equivalent of their tokens divided evenly among those votes that were cast by other members.

The second tier is a sliding window used to calculate an estimate for the total value of support, opposition, and uncast or invalid votes. The time window slides forward by 7 days after each vote closes, so the minimum number of supporters required for a proposal to pass is constantly changing based on the current level of support, opposition, and overall token distribution.

The third tier is an exponential decay used to calculate how much weight each subsequent vote carries. This means that the amount of power required to win decreases over time, making it easier for a proposal to pass as more votes are cast.

The fourth tier is an accumulator used for non-divisible tokens in order to prevent loss of voting power when certain members abstain from voting.

The fifth tier is the quorum, which represents the minimum amount of support required for a proposal to pass. This number cannot be changed or manipulated by any vote and can only be increased over time as more tokens are minted into existence.

DAO Vault/Funding

This section discusses how DAO members can manage the distribution of community funds and decide where they should be invested, what projects they should support, and how much should be spent; it also looks at how funding allocations are decided.

The first step of this process is to create a multi-sig wallet that holds community funds in a secure vault and contract. This contract can be whatever the community wants it to be, including an existing organization or business, but it will need to have some public parameters on which all members agree before they send their ether to it. This vault contract can be used to distribute funds to any legal proposal that includes a description of how they plan on spending the money.

The second step is for proposal submitters to send their proposal along with what percentage of the total amount of ether held in the vault they are requesting. The current percentage will be divided by this number and sent back,

The disbursement of funds from the vault is done through a proposal that requires a minimum amount of voter support in order to avoid being denied. The proposal can take two forms: a single payment, which would require one “yes” vote and no “no” votes to pass; or a series of payments that form part of a larger project. Proposals for partial funding are also required to have a minimum number of supporters for each stage in order to prevent any single stage from being stopped or delayed due to lack of support.

The way the contract manages each proposal depends on whether it’s a single payment or a series of payments. In the former case, it means passing a vote to transfer the funds from the vault contract to another account. In the latter case, it means allocating money for each subsequent proposal toward the next stage of the project until it’s finished.

Each member that creates a proposal has the option of adding an ether value per hour if the proposal requires team working resources, as well as a maximum number of hours for which they will work on it.

DAO Reputational Management

This section looks at how reputation is calculated and used within the DAO to encourage high-quality proposals, discourage low-quality ones, and drive the creation of new projects that members may not have thought about themselves.

The DAO should incorporate a function that assigns each member points based on the number of votes they have cast. This can be programmed in any way that is agreed upon by community members, but it should take into account both the quantity and quality of their vote, with quantity having a more significant impact on reputation.

Achieving a specific reputation level should unlock certain privileges within the system, with higher levels offering more voting power. For instance, if the first tier is 0–999 reputation points, then voters could have 1 vote. If it’s 1000–4999, then they can have 2 votes. The next level might be 5k–19k, giving them 3 votes — and so on until the highest possible tier is reached at 40 million or more.

The first step is to create an accumulator contract that starts with 0 rep and tracks each proposal’s level of support, opposition, and overall “yes”/”no” value.

There are five tiers of reputation that a member can have, each with a different set of privileges. This includes things such as being able to create proposals without going through the vetting process, having their own private forum within the DAO, and being eligible for extra funding from the vault beyond what is given by other members.

That’s the basic framework right now. Go nuts.

We’ll release a V2 in the next few weeks.

Hit us up on Twitter to ask any questions you might have (McDAOnolds) or check out our site to mint a meal and support our thinking. (




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